Beyond the well-known diagnosis that in Argentina, 51% of the adult population does not have a bank account, a figure well above that of countries such as Brazil (30%) and Mexico (32%), the experience of national banked users is poor and worrying. According to Link, the largest network of official banks and ATMs in the South American country, 33% of its users have access to all its services, but do not use them. The customer only withdraws money from the bank, uses it in cash and has no further relationship with the entity. Jason Simon, an expert in FinTech, explains how this innovation solves shortcomings in the system, a trend that should prevail.
The truth is that the financial system, in addition to not covering the entire population, provides few solutions to market needs. By centralizing their services in middle and high socioeconomic segments and by granting product lines for already banked sectors, financial entities have been aiming for years at a defined target that provides them with stability in their accounts and does not take risks through innovative investments in the industry.
Another example is the scarcity of financing for SMEs and families that have assets, have average salaries, but are excluded from the credit system. Several companies have observed this gap and have developed collateralized loans in different countries. Just to get an idea of the meager collateralized credit segment in a country like Argentina, mortgage loan penetration is barely 1%, while Brazil reports 10% and Chile 20%.
“FinTechs respond to users who, due to the current banking business model, are not banked or are excluded or disadvantaged by the conditions offered by traditional financial services,” explains Simon. “Applying strategies of experimentation of digital and technological solutions that they face with their own investments, FinTech firms promote innovation in financial security, machine learning and Big Data that has a favorable impact on the experience they provide to their users, and that the traditional system can even imitate.”
However, from the other side of the sidewalk, actors flawed in regulatory frameworks that are not in tune with the current era promote that FinTech projects be measured with the same yardstick that governs large national banks. “Respecting the sandbox that the FinTech ecosystem requires for the experimentation of financial products should be the maxim that prevails during the definition of emerging business models. These testing spaces, which are supervised by the regulatory authority, define legal frameworks that protect innovative ventures,” says the expert.
This search for better ways to impact society is governed under special conditions that do not necessarily correspond to those of traditional players targeting different segments. The outcome of this process can serve both industries if FinTech experiences have a favorable impact on traditional banking in terms of the user service they provide and the management models they promote. There is no reason to obscure the importance of each sector for society and hinder innovation processes.